TaxEsqBlog -by Ronald J. Cappuccio, J.D., LL.M.(Tax)

The IRS announced the following inflation adjustments for 2009: The value of each personal and dependency exemption, available to most taxpayers, is $3,650, up $150 from 2008. The new standard deduction is $11,400 for married couples filing a joint return (up $500), $5,700 for singles and married individuals filing separately (up $250) and $8,350 for heads of household (up $350). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes. Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $67,900, up from $65,100 in 2008. The maximum earned income tax credit for low and moderate income workers and working families with two or more children is $5,028, up from $4,824. The income limit for the credit for joint return file...

IRS Form 1042 - Report Payments to Foreign Businesses Businesses paying U.S. source income ( including interest, dividends, rents, royalties, wages, fees) to any foreign company, foreign individual, foreign partnership, etc. (foreign persons”) must report the payments and the amount of U.S. tax, if any, that was withheld to the IRS on Forms 1042 and 1042-S. The IRS is enforcing withholding compliance associated with Forms 1042 and 1042-S. The IRS will attack businesses failing to withhold the correct amount of U.S. taxes. For example, if a business withheld the wrong amount of U.S. tax from a payment it made to any foreign persons, the U.S. taxpayer will have to pay the tax due plus penalties and interest. The IRS has shown its determination to intimidate taxpayers into compliance by releasing a new provision in its audit manual: IRM 4.10.21, "U.S. Withholding Agent Examinations -- Form 1042". This manual explains the procedures to be followed by the IRS during an examina...

The Internal Revenue Service has an onerous and expensive 2-step process for approval of exempt organizations. Because of the new IRS 990 annual filing requirement for non-profits, the IRS is changing the process. Instead of giving a 5-year preliminary approval requiring a review after 5 years to demonstrate the charity receives public support, the initial letter in now a final "Letter of Determination." This will eliminate the review but does not make up for the extra work of filing the 990,

The IRS seized $97,000 from Raceland, Ky. The Mayor told a startled city council at an emergency meeting Wednesday night that the Internal Revenue Service has seized close to $100,000 from the city coffers because of non-payment of 2006-2007 taxes. This means the muncipal employees will lose their jobs and leaves the town in a precarious position for supplying fire and police services. Read more about this IRS attack.

New PIN Requirement for 2009 Filing Season Starting with the 2009 filing season, all 1040 taxpayers filing electronic returns must sign their returns using an electronic personal identification number (PIN). A taxpayer's electronic signature will include a five-digit PIN that they create and either their prior year adjusted gross income (AGI) or prior year PIN .

Interest Rates Increase for the Fourth Quarter 2008 The IRS announced that interest rates for the calendar quarter beginning October 1, 2008, will rise by a full percentage point. The interest rates are: 6 % for over payments (5 percent in the case of a corporation); 6% for under payments; 8% for large corporate underpayments; and 3.5% for the portion of a corporate overpayment exceeding $10,000.

Economist Robert Shiller (of the Case-Shiller Housing Index) announced his findings concerning housing price trends. He predicts the nationwide average price decline for homes will likely exceed the 30% decline that America experienced in the 1930's Great Depression. Since average price declines already are in the 20% range, the 30% benchmark is rapidly approaching. Some of the formerly "red-hot" markets are down 50% or more.